CONNECT CERAMICS LIMITED

Executive Summary

Connect Ceramics Limited is currently experiencing financial strain, evidenced by negative working capital and a significant reduction in fixed assets and retained earnings. While the company remains solvent with positive net assets, its liquidity challenges and asset downsizing require focused management action to restore financial health and ensure sustainable operations. Prompt attention to cash flow management and cost control will be critical to avoid further deterioration.

CONNECT CERAMICS LIMITED - Analysis Report

Company Number: 12785748

Analysis Date: 2025-07-20 17:26 UTC

Financial Health Assessment of CONNECT CERAMICS LIMITED

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1. Financial Health Score: C

Explanation:
The company demonstrates a mixed financial condition characterized by significant asset reductions and current liabilities exceeding current assets, indicating symptoms of financial stress. However, it retains positive net assets and shareholder equity, which points to some financial resilience. The score "C" reflects a cautious stance—neither robustly healthy nor critically weak, but with notable warning signs.

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2. Key Vital Signs

Metric	2024 Value (£)	2023 Value (£)	Interpretation
Total Tangible Fixed Assets	75,082	167,769	Sharp decline (about 55%) in fixed assets suggests asset disposals or write-downs—potentially reducing productive capacity or reflecting restructuring.
Current Assets	92,731	143,005	Decline in current assets, notably cash down by over 50%, indicating a weakening liquidity position.
Current Liabilities	108,863	102,646	Current liabilities have increased, surpassing current assets, creating a working capital deficit (net current liabilities of £16,132). This is a symptom of short-term financial strain.
Net Current Assets (Working Capital)	-16,132	40,359	Shift from positive to negative working capital is a red flag, as it implies the company may struggle to meet short-term obligations from current assets.
Creditors > 1 Year	0	52,930	Elimination of long-term creditors improves long-term solvency but may indicate refinancing or repayment pressures.
Deferred Tax Liability	14,883	38,732	Reduced deferred tax liability improves net asset position but remains a future obligation.
Net Assets / Shareholder Equity	44,067	116,466	Net assets have declined substantially (~62%), reflecting accumulated losses or asset reductions. However, positive equity remains.
Share Capital	10	10	Minimal share capital, typical for small private companies—does not materially affect financial stability.

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3. Diagnosis

The company’s financial "vital signs" reveal symptoms of distress in liquidity and asset base:

• Liquidity Stress: The transition from a healthy working capital surplus in 2023 to a deficit in 2024 indicates that current liabilities now outpace current assets. This may constrain the company's ability to cover near-term debts and operational expenses without additional financing or improved cash flow management.

• Asset Base Shrinkage: Fixed assets, particularly motor vehicles, have been significantly reduced (notably a disposal of motor vehicles worth £129,723), indicating a possible strategic downsizing or asset liquidation to generate cash or reduce costs. While this improves cash inflows temporarily, it may reduce operational capacity or future earning potential.

• Improved Long-term Solvency: The removal of long-term creditors suggests the company has either repaid or restructured long-term debt, improving its long-term solvency profile, which is a positive sign.

• Profitability & Retained Earnings: The substantial decline in retained earnings (profit and loss reserve) from £116,456 to £44,057 suggests recent losses or heavy expenses. The company is still solvent but has depleted a significant portion of reserves.

• Small Company Regime: The company reports under the small companies regime and has not been audited, which limits the depth of financial scrutiny but is common for companies of this size.

Overall, the company is in a vulnerable state—its healthy cash flow appears compromised, and it shows early signs of financial strain. However, it is not insolvent and maintains positive shareholder equity, indicating potential for recovery with appropriate measures.

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4. Recommendations

1. Improve Liquidity Management:

   • Tighten debtor collection processes and optimize stock levels to improve cash inflows.
   • Consider negotiating extended payment terms with creditors to ease working capital pressures temporarily.

2. Review Asset Utilization:

   • Assess whether the disposal of assets (notably motor vehicles) aligns with operational needs or if it may impair future revenue generation.
   • Consider leasing or financing options for necessary assets to preserve cash.

3. Financial Planning & Forecasting:

   • Develop detailed cash flow forecasts to anticipate liquidity gaps and proactively manage funding needs.
   • Explore options for short-term financing if cash flow remains tight but ensure cost-effective terms.

4. Cost Control:

   • Conduct a comprehensive review of expenses to identify and eliminate non-essential costs.
   • Evaluate the sustainability of current operating expenses given current revenue trends.

5. Stakeholder Communication:

   • Maintain transparent communication with shareholders, creditors, and suppliers about financial status and plans to restore financial health.

6. Consider Professional Advice:

   • Given signs of financial stress, seek guidance from financial advisors or insolvency practitioners to explore restructuring or turnaround strategies if necessary.

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Medical Analogy Summary:
CONNECT CERAMICS LIMITED shows "symptoms of distress" with a weakening liquidity pulse and shrinking asset strength, akin to a patient with reduced energy reserves and strained circulation. While the company is not in critical condition, it requires prompt intervention to restore "healthy cash flow" and strengthen its financial "immune system" to avoid deterioration.

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